ProShares’ exchange-traded bitcoin fund will trade futures contracts on the Chicago Mercantile Exchange (CME), which is registered with the Commodities Futures Trading Commission (CFTC). It will not own Bitcoin directly, but will seek to track front-month bitcoin futures contracts.
This means the short-dated contracts’ value should closely track the spot price, although the prospectus warns the performance of bitcoin futures contracts and fund may differ significantly from the performance of bitcoin. Traders generally buy cash settled futures contracts to hedge exposure or speculate on future price movements.
The ETF will charge a 0.95 per cent annual management fee and Mr Miller said he didn’t see crypto-tracking ETFs listed on traditional securities exchanges as competition for the bevvy of new crypto-only exchanges due to different fees and product classes.
“Kraken has 80-plus assets on its exchange, when you trade on Kraken, you’re trading directly on the market with other counterparties. The fees you pay a business like Kraken are really low. So, I’d say to the extent that there’s more exposure to crypto for people in traditional funds it’s a good thing, but in terms of it being direct competition, I don’t think so.”
Multiple other fiat-based ETF issuers have flagged plans for futures-based or synthetic crypto offerings including Cathie Wood’s Ark Invest, VanEck, Valkyrie Investments, Invesco, and Galaxy Digital. On October 21, the US Financial Stability Oversight Council is scheduled to update the market on a report over the regulation of stablecoins.
In Australia, the Senate Select Committee on Financial Technology and Regulatory Technology will deliver a final report on digital asset and cryptocurrency regulation on October 30.
Last week Chi-X exchange boss Vic Jokovic said the The Australian Securities and Investments Commission has taken a cautious approach over the issue to avoid any missteps. Local ETF providers including Betashares and ETF Securities have expressed interest in launching cryptocurrency-based funds.